Can actors, artists, musicians, and performers get PPP loans? (2021 rules update)

In this 6-minute read:

  • Can actors, artists, musicians, and other performers get a PPP loan?
  • Important 2021 PPP rules updates that can make a huge difference for Schedule C applicants
  • Other eligibility requirements for first and second draw PPP loans
  • How should artists and performers calculate their maximum PPP loan?
  • What should artists, musicians, actors, and other performers spend the PPP loans on in order to receive loan forgiveness?
  • Applying for PPP loan forgiveness

When the CARES Act was first enacted and the Paycheck Protection Program came into play, most people assumed this loan program was only available for brick-and-mortar businesses with employees on their payroll. The SBA later confirmed that independent contractors and other self-employed individuals without employees are just as qualified for this program. 

As an actor, musician, artist, or other performer in the entertainment industry, you earn a paycheck and have financial needs just like anyone else. And if you meet certain qualifications, you may be able to take full advantage of this stimulus program to help during this time when work might have been slow. 

Please note, though the PPP application deadline is being extended, you only have until May 31, 2021 to get your application submitted to the SBA. After that, the SBA will only process existing applications that have already been submitted, until the PPP deadline of June 30, 2021. 

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Can actors, artists, musicians, and other performers get a PPP loan?

Whether or not a performer or artist qualifies for the PPP loan depends on their employment status for that job. If you are a W2 worker for a company in your industry, you couldn’t apply for the PPP loan based on your W2 job. 

But you can get a PPP loan for any income that you earn as an independent contractor or self-employed individual, regardless of whether you also have a W2 job. You just need to have the tax filing to verify that (IRS 1040 Schedule C) and must have earned at least $4800 in gross wages for 2019 or 2020 for your 1099/Schedule C/gig work job. 

New PPP max loan calculation rule for Schedule C (form 1040) applicants in 2021 

On February 22, 2021, the Biden-Harris administration announced some major PPP rule updates, one of those being that Schedule C filers could choose to use their gross profits instead of net profits to determine their max PPP loan amount. This allows more people the ability to apply for this financial assistance and allows America’s smallest businesses to get even more funds. 

This might make the difference for many performers, artists, and musicians who were on the border of PPP eligibility. 

Other eligibility requirements for first and second draw PPP loans

Beyond your employment status as a business owner, sole proprietor, independent contractor, or eligible self-employed individual in the entertainment industry, you must also meet a few additional requirements if you wish to apply for the PPP loan. 

Currently, borrowers can apply for either a first or second draw loan. A first draw loan is for those who haven’t yet received a PPP loan and the second draw loan is for those who have received a PPP loan. 

First draw loan requirements:

  • You must have the right employment status and also have been in business as of February 15, 2020

Second draw loan requirements:

  • You must have received the PPP loan already
  • You must have spent your first PPP loan on approved expenses by the time you receive the disbursement of your second draw loan
  • You must be able to show at least a 25% reduction in your revenue when comparing any 2020 quarter to 2019
  • (You must have fewer than 300 employees)

For more information about PPP loan eligibility and special circumstances that may apply to you, visit our FAQs:

How should artists and performs calculate their maximum PPP loan?

There’s a specific formula to calculate the maximum PPP loan that you can receive, you can’t just apply for any amount that you think will help. For artists, musicians, actors, and other performers without employees, you will likely use the following calculation to determine the loan amount you can apply for:

  1. Get your 2019 or 2020 IRS Form 1040 Schedule C (you can choose which one) and find the number on line 7 for your gross profits. You can also choose to use line 31 for your net profits, but gross profits will probably get you a larger loan. Just make sure that number is less than $100,000. If it doesn’t exceed $100,000, then you’ll just need to reduce it to $100,000. 
  2. Take the number you got from Step 1 and divide it by 12 to get your average monthly income. 
  3. Multiply your average monthly income by 2.5. This will be your maximum loan amount if you don’t meet the special circumstances in Step 4. 
  4. If you received an Economic Injury Disaster Loan in 2020, you can add any outstanding loan amount made between January 31, 2020 and April 3, 2020 to your maximum loan amount. Just don’t add any advance that you received on the loan since that doesn’t have to be paid back. 

Knowing this number ahead of time can help you plan how you will spend your PPP loan so that you can receive loan forgiveness. 

What should artists, musicians, actors, and other performers spend the PPP loans on in order to receive loan forgiveness?

As you may have guessed by now, you must spend your PPP loan funds on authorized expenses if you wish to receive full loan forgiveness. The SBA has listed out all of the approved expenses for businesses under this program, and we’ve put those into context for what that might look like for entertainers and artists. 

Income

First, you need to know that at least 60% of the PPP loan needs to go towards payroll costs—in this case that’s your income (assuming you don’t have any employees). You may also choose to apply 100% of the loan towards your income, and that is perfectly fine for loan forgiveness. 

If you have other business expenses, however, you may elect to use part of your PPP loan to help cover those costs. 

Mortgage, rent, utilities

This isn’t your personal home payments, but you can use the PPP loans to pay any mortgage, rent, or utility payments related to your job. Maybe you have an office space that you manage your jobs from or you have a studio where you perform recordings or display your art. Even if you work out of a home office, you can use the PPP loan to help pay any portion that you would normally deduct on your self-employment taxes. 

Interest payments on debts

If you have any debts related to your job (credit cards, business loans, etc.), you can use your PPP loan to help make the interest payments for those debts. You’ll just want to be able to verify that those are indeed business-related debts. 

Expenses for operations

Certain operational expenditures are approved by the SBA. It could be any business software or cloud computing service that helps you facilitate important business functions, like invoicing, payment processing, inventory management, expense tracking, product or service delivery, or other sales and billing functions. 

Supplier costs

If you have suppliers that you have made contracts or purchase orders with prior to the first day of your covered loan period, you can use your PPP loan to help pay those costs. This might be supplies for your artwork or maintenance supplies for your instrument or studio or other inventory. 

COVID-19 protection

The ongoing pandemic has brought new costs along with it in the way of PPE, sneeze guards, business expansions, cleaning supplies, and more to help businesses maintain public health guidelines. If your business has incurred these costs, you can use your PPP loan to help with that. 

Property damages

In 2020, the public disturbances and riots that took place cause extensive damage to several businesses across the United States. If your studio, office, or other business-related property was damaged as a result, then you can use your PPP loan to help pay for any costs that weren’t covered by insurance. 

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Applying for PPP loan forgiveness

The last, and most important, step in the PPP loan process is applying for loan forgiveness. The most appealing part of this program is that if you follow the guidelines to spend your funds on approved expenses, you can have your entire PPP loan forgiven. You just need to apply for loan forgiveness with your lender within 10 months of the last day of your covered period. 

When you’re ready to apply for loan forgiveness (usually after your PPP funds are spent), you’ll just need to go to your lender for the application. Make sure to gather any documentation that you might need to verify where your PPP funds went—bank statements, invoices, cancelled checks, receipts, etc. Turn that all back into your lender and they’ll process it with the SBA. 

All communication for loan forgiveness will come through your lender, so stay in touch with them. When a decision has been made on your application, your lender will be the one to inform you of that decision. 

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